RATING VARIABLES
By Jerry Tuttle, FCAS, CPCU, ARe
Society of Actuaries 2005 Actuarial Speculative Fiction Contest

(The events and persons in this story are fictional. Any resemblance to real people is purely unintentional.)

    Christina Watson felt a yawn coming on, as she input yet one more form into her computer. Determined not to be seen yawning by her male co-workers who always seemed to be gazing at her, she brushed a strand of her long blonde hair away from her face, and then with a smooth motion she discreetly returned her hand over her mouth to cover the yawn. Who would have thought actuarial work was going to be so boring?

    She had been working as an actuarial analyst at the state insurance department for six months now. She once thought a career as a government actuary meant she would both serve the common good and use her math skills. Her current assignment is to input auto insurance complaint data compiled by the telephone operators and to compute statistics on each insurer’s ratio of complaints to premium. For this she had she graduated cum laude with a degree in math from State University and had studied evenings to pass the first two actuarial exams? Christina was quite pretty and had done a little modeling in college to make some extra money; during some of these boring times as an actuarial analyst, she wondered if it was too late to pursue a career in modeling instead. But then she returned to reality, and with an audible sigh, Christina continued her life as a well-compensated drone.

    Christina was only halfway through the enormous stack of complaints. Why didn’t the telephone operators input them into the computer in the first place, rather than writing them on a form by hand? She did a preliminary sort by company on the data she had input so far, to see how the complaint ratios looked. Most companies bounced around over the years in their ratios and their rankings, but once again a company called SDIC looked like it would have the lowest complaint ratio of the industry. She was curious why that was so.

    She read a few of the descriptions of the complaints. Some of them were pretty funny, as people had unrealistic expectations of why a claim wasn’t paid or what caused their premium to go up. Christina decided that complaints basically fell into those two categories, and she thought it might be interesting to compile the data separately. She decided she had better ask her boss if that was OK.

    “Sure, Christina, go ahead,” replied Chuck Tramwell, in an annoyed tone suggesting he was far too busy with his own more important work to be bothered with Christina. Chuck, a recent Fellow of the Society, with his stylized hair, expensive shantung silk shirt and power tie, was the rising star, an actuary who was making a name for himself in the state insurance department by whittling down rate increase requests from the largest companies. Chuck in fact was preparing for an upcoming rate hearing, and he had been predicting that when he was done, the company’s requested 10% increase would end up as a rate decrease.

    “Arrogant bastard,” muttered Christina under her breath, as she smiled sweetly at him. But at least she had gotten what she wanted.

    Christina started from the beginning of the pile with the first form, now inputting a new data field called complaint category. About half the complaints were about claims-handling, and half were about premiums. It took her several days to finish the work. Then she ranked the insurance companies for their overall complaint ratios, and also separately for their claims complaint ratios and their premium complaint ratios. When she was done, she noticed SDIC was the leader with the lowest overall ratio, was in the middle of the pack for its claims complaint ratio, and was by far the leader for its low premium complaint ratio. In other words, SDIC policyholders were about average in complaining about claims, but they hardly ever complained about their premiums. Doesn’t everyone complain about the price of auto insurance? Now Christina was really intrigued.

    She went to the file drawer and pulled out the file on SDIC. There were several years of financial statements, reports to various governmental bodies, rate filings, news clippings, and so on. Unfortunately this was not a public company, so there were no SEC filings, which would have been a good source of information. Christina looked at the photos of the SDIC executives and board members from the glossy annual reports. A couple of the people looked vaguely familiar. She kept reading.

    It turned out that SDIC was a privately owned company, and the majority owner was none other than State University. A few of the board members were university professors. During the last insurance crisis, the university convinced the state legislature that they had some fresh ideas about running an insurance business, and so the legislature passed a special statute to incorporate the company. SDIC had been formed to help solve the problem of the unavailability of automobile insurance by using university resources in a creative manner. SDIC claimed to have brought some unique practices to the auto insurance industry in driver safety and other areas.

    There was a memo in the file from Chuck Tramwell recommending approval of the latest SDIC rate filing and where to find the actuarial data on the department LAN. Christina went to the LAN and tried to open the spreadsheet. The spreadsheet asked for a password. This was odd; she had not seen any other company rate filing that was password protected.

    The file also contained the latest insurance department market examination of SDIC. A number of examiners had visited the company’s home office to audit a sample of policies and claims, and to ensure the company was operating according to the law. Chuck had been part of the audit team, and there was a memo from him describing the policies he had rated and stating that the policies were indeed rated according to the company’s filed rating plans and rates.

    She waited until she could accidentally run into Chuck in the hall. She had hoped he would be in the company kitchen, but of course Chuck would not drink company coffee, preferring the high-priced Yuppie coffee from the store across the street. “Chuck, I finished the complaint ratio project. SDIC had the lowest complaint ratio again last year. Who is this SDIC?” she asked innocently.

    “SDIC? I think it stands for Safe Drivers Insurance Company. They’re a very innovative company,” he explained. “I think they’re adapting ideas from other kinds of insurance like health insurance and workers compensation for use in auto insurance. Nobody else in the business has taken that approach. I know they haven’t made much of a profit yet, but they entered the market a few years ago when very few companies were writing auto insurance, and they stepped in to avoid what could have been an embarrassing crisis for the governor.”

    “Well, since they had the lowest complaint ratio for the third year in a row, maybe we should give them a little positive publicity on the insurance department web page,” Christina suggested. “What do you think?” she asked.

    “Sure. I think you should chat with their actuary to learn a little about the company, and then write something nice about them for the web page,” said Chuck, as if this were his idea. “Let me see it before it you post it.”

    Christina looked up the name of SDIC’s actuary, called him, and made an appointment. Three days later, she was seated on a sofa next to him in his office.

    Ned Griffith was in his late 50’s. He was tall and thin, with salt-and-pepper hair, and he wore a blue dress shirt open at the collar and well-pressed khakis. Ned spoke patiently and without condescension. He reminded Christina of her kindly old Uncle Harold. Christina pegged Ned as an actuary who had seen it all in his career, but she was unsure if he was the type who would happily share his vast knowledge with an insurance department employee who might be considered the enemy. Christina was not above using her looks to advantage, as she crossed her legs and let her skirt inch up her thighs.

    “Congratulations on your company’s third year in a row with the lowest complaint ratio, Ned,” she began, giving him a dazzling smile that she hoped would disarm him. “What do you attribute this to?”

    “Thank you,” he replied. “I personally had nothing to do with that. But I think we do a lot of little safety-related things that make us successful. For example, we require our customers to take a vision test annually and to update their eyeglass prescription if necessary. Did you know that the motor vehicle division only requires a vision test when you first get your license, and that 15% of accidents are partly attributable to outdated eyeglass prescriptions?” Ned was a true compendium of little known facts, much like Cliff from the television show “Cheers,” full of wisdom if only someone turned him loose.

    “That’s very interesting,” said Christina, unconsciously batting her long eyelashes at him now that the subject had turned to eyes. “But that doesn’t really explain why so few customers seem to complain about your company. Why don’t they complain about their premiums?” she asked.

    “Oh that. Do you know about our one free accident philosophy?” he asked. She shook her head no. “Nearly every company I know will surcharge you for an at-fault accident. Most actuaries will explain this in terms of conditional probability - once you have had an accident, you are more likely to have another in the next three years, and the claim frequency of the entire group of people who have had an accident is higher than the frequency of the group of people who have not had an accident. But we think that theory is wrong. The variability within that one prior accident class is enormous, and in fact, most people who have had an accident do not have another in the next three years. So much of why people have accidents is randomness anyway. Some statisticians, who have a much better statistical background than we actuaries have by the way, believe that having had a single accident provides no useful information about the chance of having another one. So therefore, under most circumstances, we don’t surcharge you for the first accident. This alone probably eliminates 75% of customer complaints.”

    “And speaking of accidents being random, at SDIC we decided not to just look at a couple of years of experience and make huge adjustments to rates in our annual rate filing. We are committed that in four out of five years, we will only adjust our total rate level by the change in the Consumer Price Index; in the fifth year we will make a larger adjustment if necessary, but we don’t think we’ll have to. Most people don’t mind if the price of something, like breakfast cereal, creeps up a little each year, especially if it’s to keep up with inflation. It’s the huge increases that people get upset about. So this is another reason that not too many people complain about their rates.”

    Ned had explained this in a patient way, like an elderly professor explaining great truths to an audience of youthful students who were captivated and enthralled by his every word. Christina could not come up with a way to disagree with anything Ned had said.

    “I noticed that the spreadsheet containing your rate filing was password protected. Why would that be?” she asked gently.

    “Ah yes. This is a little delicate,” replied Ned, lowering his voice to a near whisper, as if the walls might be bugged. “You know that companies use proprietary catastrophe models and credit scoring models, and they generally file these with the insurance departments but don’t leave the details available for competitors to come in and photocopy?”

    “Yes,” said Christina. “And I know that credit scoring is not approved in this state because of unfair discrimination concerns.”

    “We don’t use credit scoring because it is not approved,” said Ned, “although we respectfully disagree with the department’s decision. Nevertheless, we do have a proprietary rating model that we file with the rate filing. Your chief actuary has reviewed it and confirmed that it meets all the state’s statutory requirements. We have an informal agreement with the commissioner of insurance that we file the plan with the insurance department including all the supporting detail, but that the department will keep it absolutely confidential. Otherwise any competitor can look at it and steal it. We feel this rating plan gives us a serious advantage over our competition. I’m afraid I can’t tell you any more than that.”

    “You haven’t asked much about our unique safety features,” Ned continued, deftly changing the subject. Companies that write commercial auto insurance and workers compensation have been emphasizing auto safety for years, but for some reason the personal auto insurance business has not adopted their ideas. Well, we have. For example, we have some state-of-the-art driving simulators at the university, and we require our customers to spend some time with them for safety education. I can make an appointment for you to test them out if you like. You can simulate driving on ice, driving while drunk or sleepy, or driving while talking on a cell phone, for example. These are some of the reasons why people have accidents, and you’d be amazed what a little time in the simulator does to people’s driving behavior. It’s probably not popular among young people like yourself for me to say this, but we think of our customers as our children, and we try to make driving safe for them just as we try to keep our children safe.”

    Christina thanked Ned for his time, said her good-byes, and left.

    As Christina drove back to her office, she was disturbed by some of what Ned had said. There was something very odd about this company. She was not sure she liked the idea of the company’s paternalism. The password protected file and the secret rating plan were very strange. Ned would not talk about much about them, and neither would Chuck. Where was the Freedom of Information Act when you needed it?

    Christina returned to her desk, and pulled up the SDIC rate filing. Of course, the computer asked for a password.

    She went to her spreadsheet’s on-line help to inquire about passwords. A password may be up to fifteen characters of either upper or lower case text, numbers, spaces and symbols. That’s a lot of permutations, she thought. But not so many that she couldn’t write a macro to run overnight to try them all by brute force. By the time she was ready to leave for the day, she had written the macro, and she let it run. Christina was unaware that the insurance department was a few versions behind in upgrading its spreadsheet software; the current version would have allowed passwords of up to 255 characters!

    The other thing Christina did was place a call to John Donnelly, her insurance agent. “I’ve heard good things about this SDIC,” she said to her agent. “Are they any cheaper than the company I have now?” she asked.

    “No, they’re not cheaper,” laughed John. “I think it’s because they are making you pay for extra safety equipment for your car. I’ve heard they even put a black box in your car that monitors your driving habits. Anyway, their rates don’t go up very much each year. Would you like me to e-mail you an application?”

    “Yes, please do that,” Christina said.

    When Christina got home, the SDIC insurance application was waiting for her in her e-mail. It looked pretty standard, with a few exceptions. One thing was that she would be required to take a brief physical exam and to allow the insurance company to see the results. Another was that she had to agree to let the insurance company install a Global Positioning System device and other related items in her car. A third thing was that she had to declare in advance all people who might possibly drive her car and to estimate what portion of time each of them would drive, because her rate would be calculated as an average over all possible drivers. Christina was not happy with any of these things, but she understood why a company would want them, and she e-mailed the application back.

    Christina returned to work the next morning and saw that the macro to try all the possible password permutations was still running. It had barely made a dent in all the permutations. She examined the keyboard and then did a quick calculation: there are 26 letters of the alphabet times two to account for upper and lower case, plus 10 numerals, plus 32 symbols on the keyboard, plus space. She had not realized how many symbols are on a keyboard. The number of possibilities for a 15 character password would be something like 95 raised to the 15th power. No wonder it was still running! She decided to pause the macro so she could do some work, but to start it up automatically each evening at the point where it had paused. This might take many evenings and weekends.

    A few days later her agent John called her back, and told her the next step was to make an appointment for the physical exam. John gave her the name of several doctors, and she selected one and made an appointment during her lunch hour.

    Christina selected a doctor who had an office near State University. She thought after the exam she would meet some of the SDIC board members who were professors.

    She found the doctor’s office, checked in with the receptionist, and was told the doctor was running a little late. She took a seat.

    She looked around. There were a number of other patients, some talking in twos. There were some really hot looking guys. Christina was not dating anyone at the moment; she certainly was not going to date another actuary from work. Kissing another actuary would be like kissing your brother, she thought. She looked around the room hopefully.

    Christina casually flipped her blonde hair in the direction of a good-looking guy, and not surprisingly he took the bait and came over to sit next to her. His name was Jay, he was not much older than she and might even have been a year or so younger, and the two started talking. She recognized right away that Jay was in flirt-mode. Jay asked her a lot of questions. He was easy to talk to, and besides, he had the most beautiful brown eyes. Before long they exchanged e-mail addresses and Instant Message IDs.

    Despite her pleasant experience with Jay, Christina had a feeling that something was not quite right about the people in the waiting room. It bugged her that she couldn’t explain what was making her uneasy.

    The nurse called her to the examining room. They took a photo of her. They checked vision and hearing, blood pressure and reflexes, and they asked her for both a blood and urine sample. The doctor explained that the company was looking for evidence of drugs, and that if a driver had an accident while on drugs, the company would make the driver reimburse them for 50% of the claim. Christina signed a form indicating she understood and agreed to this. The form also said that she consented that the results of the exam would be forwarded to the insurance company. The doctor said she did not need eyeglasses, and that everything else checked out OK. She thanked the doctor, and left.

    Christina then went to the university campus. She found the offices of three professors whose photos had been in the SDIC annual reports, and she met with each of them individually. Professor Aleksandrov was a statistics professor. He was the one who looked sort of familiar from his picture in the annual report, although Christina had not had him when she had been a student at State. Professor Metzger was a psychology professor. Professor Barclay was a biology professor. Christina told them she was a graduate of State, was considering buying insurance from SDIC, and while at the doctor’s office for a physical had happened to see their pictures in the SDIC annual report. The professors admitted to being investors in the company and having varying degrees of involvement. Aleksandrov was not an actuary, but said he had contributed some statistical research to the company. He wondered if they had found any use for it. Metzger was involved in the safety simulators, and said his students do a lot of research on factors contributing to auto accidents. Barclay did not appear to have any special involvement except that the university had wanted a few professors to be on the board to protect its own investment.

    There was one more interesting thing about the professors. They were all too well-dressed compared with the other professors Christina knew. She had modeled, so she knew clothes.

    What she did not know was that later that afternoon, the three professors met and compared notes about the cute woman who was asking a lot of questions about their involvement in SDIC.

    Christina had spent far longer than her lunch hour on the physical and with the professors, so she hurried back to work and hoped no one would notice that she was late. Of course, with her good looks, Christina never went anywhere unnoticed. She busied herself with one of the many boring projects sitting on her desk, and she hoped no one would ask her why she was late.

    Each night before she left work, Christina would resume running the password macro, which was running through billions of permutations each night, but had not yet found the right one. She spent a few hours at home each night studying for the next actuarial exam. She also went on the Internet before bed. It was funny, but she had never gotten an e-mail or an Instant Message from the guy who had flirted with her in the doctor’s waiting room. She was not accustomed to guys taking her information and then not contacting her for a date.

    Too bad. She remembered his beautiful eyes. She also remembered that something seemed odd about the people in the waiting room. Suddenly it hit her. His eyes. No, his eyelashes. Not only were they long, but they were curled upward. He had not been wearing makeup - that would have been quite obvious - and she was sure from the way he had flirted with her that he was not gay, but he had definitely curled his eyelashes. As a former part-time model, she was certain of this. Christina thought about all the guys she had known. She didn’t think one guy in a thousand would curl his eyelashes. Unless he was some sort of a model. Now that she thought about it, that is what made her uneasy about the waiting room. All the guys had curled their eyelashes. This was not a random group of guys. They had all been in that waiting room for a reason, although the reason was not at all clear.

    In a few days, Christina got a letter in the mail saying SDIC had accepted her application for auto insurance. Since she already had a policy from her other insurance company, she wondered how the two companies would jointly pay for a claim if she had one; she didn’t realize this was a common exam question on a later actuarial exam. But she paid her premium anyway, thinking that there was more about this SDIC company that she had to find out about.

    She was required to spend a few evening sessions on campus with the psychology department and their driving simulators. She learned more about lane changing and stopping distances and such than she had ever learned in drivers ed. While she was there, SDIC installed a Global Positioning System device in her car, and also a small black box which they hid somewhere between the back seat and the trunk. The installer explained how these items would help her if her car were stolen, if she locked her keys in the car, if she was stranded, and so on. These devices were state-of-the-art and combined GPS, artificial intelligence, and generalized linear modeling algorithms to reduce her potential for having an accident. For example, it would advise her in a gentle voice when she was too close to the car in front of her for the speed she was driving. Of course, nothing was fail-proof, and there were no guarantees.

    Christina signed a form consenting to SDIC installing the equipment in her car. Besides the Global Positioning System device, SDIC had installed an Event Data Recorder. The installer explained that this equipment can be useful to claim adjusters in analyzing the actions of the driver just before an accident in such things as seat belt status, vehicle speed and direction, brake action and acceleration or deceleration force, turn signal activation, and so on. Christina understood how this information could be used to determine whether or not the driver was at fault in the accident. She wasn’t pleased, however, about her privacy being violated in the name of insurance. What would they do next, record every word she said while she was driving?

    Christina received her policy and insurance ID card in the mail. The ID card was laminated, had her picture, and had nearly two dozen color-coded and numbered rectangles on it. She assumed this had something to do with the different rating parameters for the policy.

    At first, the GPS device in the car was annoying. It had been programmed to tell her when she was driving three miles per hour over the speed limit, and it warned her in a whining female voice. Christina discovered she could program the speed tolerance to ten miles per hour over the speed limit. She also discovered she could program the voice, and she chose the rich mellifluous tones of actor James Earl Jones. She gave the GPS the name of James, and James gently warned her when she was not keeping a proper distance from the car ahead of her, and when that car suddenly stopped short. James was also useful for providing driving directions, and he knew to suggest alternative routes when traffic was slow. It was almost fun to have James speak to her by name, and James became a helpful driving companion, keeping her away from some near-miss accidents.

    Work was slowly getting a little more interesting for Christina. Chuck had her work on a few of the rate filings he was handling, or at least some parts of the filings such as the trend component, and Christina felt she was finally doing something at least a little useful. One morning she arrived at work to a spreadsheet open on her computer. The password program, which she had been running evenings for several weeks now, had stopped on its own. After about ten raised to the thirty attempts, she had found the correct password to the SDIC rate filing spreadsheet.

    Christina looked around nervously to see if anyone was watching. When she was sure no one was, she excitedly began maneuvering around the spreadsheet.

    Most of the spreadsheet was the actuarial documentation for a standard auto rate filing. It contained a summary of the overall requested rate change, which was indeed equal to the change in the Consumer Price Index, as Ned Griffith had told her, plus actuarial calculations for the various premium, loss, expense, and profit components of the filing. She had seen these calculations in many other rate filings. She deliberately went through one tab at a time, in sequence, determined not to miss any. As she patiently followed some of the calculations, she realized there were a couple of hidden tabs. That would not deter her, as she clicked the commands to unhide. A few more tabs appeared.

    These new tabs had PDF text documents within them. She pulled up the first, and it looked like a scholarly journal article. It was written by Professor Metzger, and its title was “The Correlation Between Personality Traits and Automobile Accidents.” The article had been published in some scholarly journal for psychologists and had been peer reviewed favorably. Although the psychological language was unfamiliar to Christina, it appeared that Metzger believed there were some personality traits with binary values - either you showed strong evidence of a certain trait or you didn’t. It was easy to discern whether an individual had each of these traits or not, and psychology major or drama major college students could reliably discern these traits in a ten minute interview. Further, Metzger had an enormous database of drivers, their personality traits, and their accident experience, and he had concluded which traits correlate with auto accidents. The strongest relationship was extrovertedness. According to Metzger, extroverts had a statistically significantly greater claim frequency than introverts.

    Christina thought back to the afternoon in the doctor’s office and the time she spent with Jay. Had he been interviewing her? She had probably revealed to him through her chattiness that she was an extrovert. Plus, if he had been a drama major, he might have known something about makeup, and he might have intentionally curled his eyelashes to improve his flirting potential. Perhaps all the guys in the doctor’s office had curled their eyelashes for the same reason.

    She pulled up the second PDF file. This was also a peer-reviewed journal article and it was written by Professor Barclay. Its title was “Non-Medical Applications to the Human Genome Project.” Apparently Barclay was a geneticist who was involved in researching the purposes of the 100,000 genes in the human body. Much DNA research involved identifying genetic causes of specific diseases and of using DNA for such things as identifying criminals and the remains of deceased people, and performing paternity tests. Nearly all of the funding for the Human Genome Project had gone to study these more medical aspects. Less well known, however, was that Barclay and others were studying whether DNA could explain predisposition to certain behavior - including auto accidents! Barclay claimed to have discovered an auto accident gene, and he presented his data in support of that conclusion.

    The article also contained some charts of colored rectangles. Christina pulled out her SDIC insurance ID card, and it had the same kinds of colored rectangles. She decided that this ID card must have contained a visual representation of her own DNA profile. SDIC would have obtained it from either the blood sample or the urine sample she gave the doctor. Christina felt violated - her personal privacy had been invaded. This was much more information about her than an insurance company had the right to know. It was one thing for SDIC to have her blood pressure in their records, but it was another thing to have her entire genetic makeup. And, SDIC was using DNA to rate auto insurance! Could they legally do this?

    Christina tried to print these two articles, but they would not print. There must have been some further protection on the spreadsheet file. She closed the file, never realizing that the act of opening this specially password protected file had generated an encrypted e-mail message to Ned Griffith at SDIC.

    She decided to ask Chuck a few questions on what was legal for rating purposes, but to keep things strictly professional. “Chuck, do you have a minute? What kind of rating statutes do we have in this state on unfair discrimination in auto insurance?”

    Chuck looked up, surprised. But since Christina reported to him and he was responsible for her education, it was a reasonable question for her to ask.

    “The statutes prohibit rates that are unfairly discriminatory, but this is not well-defined. Each policyholder is supposed to pay a price that is commensurate with his or her expected losses and expenses. Of course, that’s an idealized standard; nobody can statistically determine the expected loss of each and every individual policyholder. For most lines of business there is a risk classification system, and as regulators we require data supporting the classification criteria and the rate relativities among the classes. A company couldn’t just charge a different rate for red-haired drivers for example, unless there is data to support that their claims experience is different than everyone else. Even then, we might not approve it.”

    “What about which rating variables are allowable?” she asked.

    “Race, religion, nationality, ethnicity, and income are specifically prohibited on social grounds. You can’t make rates with those variables, even if the data supported it. Some states prohibit gender, although we allow it. We recently added prohibitions on credit scoring and occupation because we think they are poorly-disguised substitutes for rating by income, although we do permit territorial rating which partly accomplishes the same thing.”

    “How about genetic testing?” she asked.

    “That’s a touchy issue. I’m pretty sure that is prohibited in health and disability insurance in this state. I’m not sure where the law stands for life insurance. And the law is silent in auto insurance.” By now Chuck was suspicious. “What is prompting you to ask these questions, Christina?”

    “I’m pretty sure SDIC uses some sort of DNA testing in their auto rating,” she replied. In fact, I bought a policy, and they gave me my own DNA profile on my ID card.” She conveniently did not mention that she had tapped into the rate filing. “Is this legal? What would happen if the public found out about this? Don’t people have a right of medical information privacy?” By now Christina’s voice was quivering, as she realized she had discovered something big.

    “I recommended approval of their filing, and I don’t see what is contrary to the rate statutes. As for the public - that’s not our problem. But Christina, there is a lot of political stuff going on with SDIC. The governor and the insurance commissioner really want this company to succeed. I know you worked on the complaint ratio project, and that was great, but SDIC isn’t your company to work on, so I really think you ought to leave this alone.”

    Christina thought she had better not say any more, so she thanked Chuck and she left his office. She went back to the file cabinet, and she read the insurance department market examination reports. She recalled reading that Chuck had been part of the audit team. She visited Jack Sweeney, the head auditor, and asked whether it was common to send an actuary as part of the audit team. Jack said that he could not remember the department ever sending an actuary to a market examination, but someone had to check that the company was using the rates they had filed, and when Chuck volunteered to come and do this, Jack accepted. Christina asked if Jack thought that was a conflict of interest for Chuck because Chuck had approved the rate filing. Jack said he would have to think about that.

    She also perused SDIC’s annual statements. The company had not been profitable. But the lack of profit is not because of claims, but because they have an unusually high expense ratio. She checked further and found that SDIC had made some large payments the last several years to several consulting firms, all of which had addresses on the campus of State University. If not for these payments, the company would have done quite well.

    That reminded her about the three professors, who among other things were dressed too nicely. She ran Internet searches on all three of them. These professors were involved with the consulting firms that had received the payments from SDIC. So they were making money on the insurance company, while the insurance company was showing a loss. They had also written lots of scholarly papers in obscure peer-reviewed academic journals. She pulled up a few, but the language was not actuarial and was unfamiliar to her. The professors appeared to be operating at the fringe of the auto insurance industry. Their work was apparently being peer-reviewed and accepted by the academic community. Christina knew that using DNA testing and personality characteristics might be technically legal for auto insurance rating, but it would never be found acceptable by the public, who certainly assumed their medical and genetic history was confidential and would not be used to rate their auto insurance.

    Christina was unaware that web page owners have ways to determine who visits their web pages. Not too many people visit the three professors’ web pages, and so when they noticed the increased activity, they investigated the source. It did not take them long to discover it was Christina, and they met to discuss that.

    Meanwhile Jack Sweeney, the auditor, mentioned to Chuck that Christina was questioning the propriety of Chuck having been on the market conduct exam. Further, Chuck noticed that Christina was trying to make an appointment to see the deputy insurance commissioner. Fortunately the deputy wasn’t in, but Chuck guessed from Christina’s previous questions about SDIC, that she was about to make some trouble for a lot of people. Chuck quietly made a phone call to pass on this latest information.

    Christina drove home that night, had dinner alone, and spent a few hours studying for the actuarial exam. At about 10 pm she decided she felt like a snack, so she got into her car and drove toward the nearest convenience store. James, the GPS voice, asked her where she was going, as he usually did, and he told her there was construction on her usual route, and would she like him to plan a different route. Christina absent-mindedly said yes. James gave her an unfamiliar route. She seemed to be going much faster than the 25 miles per hour than the speedometer said, but James would have warned her if that were so. James directed her to turn left into an unfamiliar area. Christina thought there was an object a distance away directly in her path, but James who would always warn her of such things, did not caution her.

    Suddenly Christina’s car slammed into a brick wall. The car burst into flame, and Christina knew she would not be able to get out. Her last words were “James, how could you?” She died instantly.

    At the university, Professors Metzger, Aleksandrov and Barclay were huddled over a computer screen that was filled with information that had just been transmitted from the black box in Christina’s car.

    “It seems one of our policyholders just had a fatal accident,” said Metzger. “But according to our records, she was single and had no family, so she doesn’t have any relatives who might question whether her death was accidental.”

    “I hope she already paid her premium,” said Aleksandrov coldly.

END


Copyright 2005, Jerry Tuttle



Author’s note: The author is sure that the line “kissing another actuary would be like kissing your brother” is attributable to a certain well-known female actuary who is married to another actuary. However, that female actuary denies making this statement. Therefore, the author feels he does not need permission to use the line in this story.

The author would like to thank the many friends who helped with early drafts and with some of the details of this story.

My prior stories are Proof from 2001 and my favorite 1 + 1 = 0 from 2003. Thanks for visiting.